Ageing and the Economy

Time for a Debate Based on Evidence

Abstract

Policy discussions about ageing have too long taken for granted the untested proposition that population ageing will create an almost insurmountable economic burden for future generations. This paper first outlines the main claims of the ‘ageing crisis’ literature: ageing reduces labour force participation; increased dependency of non-workers upon workers will reduce future living standards; and future taxpayers will bear the cost of their parents’ and grandparents’ longevity. The paper then critically evaluates the evidence. Using an original model that combines economic and productivity growth with projected labour force participation rates, the paper concludes that the above claims are, at best, vastly exaggerated. Indeed, on reasonable assumptions, the model suggests that the ‘crisis’ claims are a furphy.